Gold Sets 9-Month Low After Silver Enters Bear Market on Dollar

(Bloomberg) -- Gold is getting trampled, and silver entered a bear market.

Bullion sank to the lowest level since February on speculation that prospects for economy-boosting policies by U.S. President-elect Donald Trump will lead the Federal Reserve to raise interest rates. The dollar reached the highest level in more than a decade and U.S. equities hit new records. Silver fell for a second day after closing more than 20 percent below the Aug. 2 settlement.

Investors in gold have been blindsided as they grapple with the consequences of Trump’s plans to revitalize growth and boost infrastructure spending. That push comes as the Federal Open Market Committee prepares to tighten in December, with better-than-estimated data on durable goods and manufacturing boosting the case for action. As the dollar surges, gold holdings in exchange-traded funds are set for the biggest monthly drop in more than three years.

“Everyone is looking for a December rate hike, and that’s what’s been priced into gold at the moment,” Tom Kendall, head of precious metals strategy at ICBC Standard Bank Plc, said by phone from London.“The dollar remains a key driver.”

Bullion for immediate delivery fell as much as 0.7 percent to $1,180.38 an ounce, the lowest since February, and traded at $1,181.89 at 3:25 p.m. in New York, according to Bloomberg generic pricing. Silver fell 0.3 percent to $16.312 an ounce.

ETF Outflows

Assets in bullion-backed ETFs have contracted 85.5 metric tons in November, retreating to 1,902 tons, the lowest level since June, according to data compiled by Bloomberg.

Gold’s decline this month is a reversal from earlier this year, when prices were surging as the Fed held off raising rates and investors reacted to unexpected political events, especially the Brexit vote.

Fed officials will hold their final meeting of the year on Dec. 13-14, and investors see a 100 percent probability of a move at that gathering, according to futures contracts. U.S. central bankers have held the federal funds rate at 0.25 percent to 0.5 percent since last December.

“The markets are still looking over their shoulder a little bit in trying to understand what Trump is exactly going to do,” David Lennox, a resources analyst at Fat Prophets in Sydney, said by phone. “There’s that safe-haven characteristic in gold. There’s still a little premium there that could keep gold from entering a bear market.”

In other precious metals, platinum fell as much as 2 percent to $912.99 an ounce, the lowest since Feb. 29. Palladium declined 0.2 percent to $733.18 an ounce.

To contact the reporters on this story: Ranjeetha Pakiam in Singapore at rpakiam@bloomberg.net, Eddie van der Walt in London at evanderwalt@bloomberg.net. To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, Lynn Thomasson, Jesse Riseborough